AMD: Moving on Up

At the end of October Advanced Micro Devices (AMD), a leading microprocessor manufacturer, completed its acquisition of ATI Technologies for $5.4 billion. The New York Times says that at the time, "The move was seen as a strategic blow to AMD's larger rival, Intel Corp., and one that would allow AMD to broaden its product portfolio and shed its image as a boutique player that sells only microprocessors and flash memory chips." Indeed, the acquisition has helped propel AMD up the ladder of semiconductor companies and to apply more pressure on Intel, the industry leader. AMD continues its upward momentum despite recent legal actions against the company and the fact that Intel has been first-to-market with competing products.

In regards to legal issues, AMD has recently made headlines on two counts. On November 30 the company was issued a subpoena by the Justice Department "regarding an investigation into possible antitrust violations in the graphics processors and cards business." The Inquirer says that, "The allegation is that Nvidia, ATI and AMD conspired to manipulate graphics card pricing." Intel, which does not make discrete graphics processor units, was not subpoenaed. The Justice Department subpoena follows the filing of a lawsuit against AMD by semiconductor design company Opti Inc. which, according to BusinessWeek Online, alleges, "infringement of three patents related to Predictive Snooping technology." Time will tell what impact these actions may have on AMD, for the time being, however, the company continues it progress forward.

Research company iSuppli, which tracks the semiconductor industry and produces an annual list of its top companies, this year listed AMD in the top ten for the first time. AMD did not make the list last year, the spin-off of its Spansion Inc. division pushed it to number 15; this year, its ATI acquisition catapulted the company to number seven. Though the ATI acquisition is given as the primary reason for AMD's leap, strong growth in microprocessor sales played a significant role as well. Furthermore, the fact that they were almost on the list last year shows the company has been consistently gaining ground. This growth is expected to continue; according to Computerworld iSuppli anticipates AMD's revenue to reach $7.5 billion, reflecting growth of 90 percent. While it is obviously making headway against other competitors, AMD's challenge of Intel is making most of the press.

Back in October, BusinessWeek ran an article which began, "No matter how you slice them, Intel's financial results reflect a recurring theme: Advanced Micro Devices is gaining share in the hotly contested computer chip market." The article notes that AMD has cut into desktop and workstation business; according to Arizona based Mercury Research, Intel's share of that market dropped about 10 percent over a year ago. On this front, AMD recently rolled out new line of power-saving processors; the chips which are priced between $169 and $301, use roughly 30 percent less energy than their predecessors. Like its acquisition of ATI, this rollout is seen as a direct challenge to Intel which has been using similar technology for the past year. As well as providing a challenge to Intel, the move should help AMD increase its own profits, as it allows for the production of more chips using a single slice of silicon. Reuters says that AMD, "will soon roll out lower power chips for laptops and the server computers that run business networks, as well as chips that deliver a mix of lower power and faster performance." AMD is making further moves against Intel by creating chips with four processing cores. Though Intel has already launched four core technology, Reuters states that, "Intel's quad-core product essentially sticks two of its dual-core chips together." AMD says its own technology will be superior as it all four cores will be placed on a single piece of silicon. Prototypes have been made and the chips are expected to be available on the market in mid 2007. AMD can also be seen going after Intel in one of technology's hot battlegrounds, the digital living room. According to Joe Menard, vice president of AMD's consumer business unit, "For AMD, the strategy used to be get a PC in the living room . . . Now it's to think about the best usage case that a customer wants and how we can provide silicon to do that." This is an assault on Intel's Viiv platform, which according to the company was, "designed for the enjoyment of digital entertainment in the home." AMD anticipates winning in this arena; Menard speculates that, "There is going to be no one usage model . . . We will support them all."

Since first-to-market so often translates to market share some are looking beyond the chips themselves, and to the location of their production, to explain AMD's continuing success. For the past decade AMD has made the east German city of Dresden its manufacturing capital. Since the original ground breaking, initiated by generous German and European subsidies, AMD has come to value the engineering prowess of its German workers. Thomas Sonderman, AMD's director of manufacturing systems, has said, "Germans are known for engineering aptitude, and we have seen it in action." According to BusinessWeek, "The ability of AMD's 3,000 workers in Dresden to ramp up production of new chip designs quickly has been crucial in allowing AMD to gain ground on chip giant Intel."

Whatever the source of their rise, AMD is moving up and this is costing Intel. Chairman of British semiconductor research firm Future Horizons, Malcolm Penn, says, "AMD is giving Intel a run for its money."

A more complete version of this posting, with accompanying informational charts, journal articles, and research reports can be found at the website of Analyst Views Weekly.

More information on this topic can be found in the Processors & Semiconductors section of Northern Light's Software, Computers, & Services Market Intelligence Center.

And in the following articles:

AMD: 'Digital Living Room' to Take Many Forms
EETimes, December 6, 2006
Speaking at the Digital Living Room 2006 summit here Tuesday (Dec. 4), Joe Menard, vice president of AMD's consumer business unit, said the concept the digital living room—the concept of a sophisticated in-home entertainment network—is likely to take many forms to suit various budgets, needs and degrees of technical savvy. "There is going to be no one usage model," Menard said. "There will be models when PCs end up in the living room. There will be models where PCs do not end up in the living room."

AMD, Hynix Leap into Top 10 Chip Rankings
Computerworld, December 5, 2006
AMD was helped by strong growth in microprocessor sales, but its acquisition of ATI Technologies Inc. is the primary reason for its near doubling of sales in 2006, iSuppli said. Its revenue for the year is expected to reach $7.5 billion, putting it in seventh place in the worldwide ranking. AMD would have made the top 10 in 2005, but spinning off its Spansion Inc. division that year pushed it down to fifteenth place.

AMD Slapped with Patent Infringement Lawsuit
eWeek, November 17, 2006
Advanced Micro Devices has been hit with a lawsuit that claims the chip maker violated three patents that belong to Opti, a Mountain View, Calif., company that makes controller chips for PCs and LCD monitors. Specifically, the lawsuit charges that AMD violated Opti's patented "predictive snooping" technology. The lawsuit, according to a statement from Opti, claims that AMD has used this technology in several of its processors.

China: AMD's New Hunting Ground
BusinessWeek Online, November 8, 2006
Advanced Micro Devices (AMD) is eyeing to grab a bigger share of the China and other emerging markets, in its fight to gain a stronger foothold against archrival Intel. Speaking to ZDNet Asia last month, Gustavo Arenas, corporate vice president and managing director of AMD in emerging markets, underscored the importance of Chinese PC makers such as Lenovo and Founder, in the chipmaker's growth strategy. Both hardware vendors recently introduced PCs and notebooks based on AMD processors.

Intel's AMD Troubles Continue
BusinessWeek Online, October 17, 2006
No matter how you slice them, Intel's financial results reflect a recurring theme: Advanced Micro Devices is gaining share in the hotly contested computer chip market, and Intel is cutting prices to cope. That's translating to a sales slump. Intel (INTC), the world's largest chipmaker, is locked in a battle with rival AMD (AMD), which has been gaining share in the desktop and workstation business at Intel's expense. Intel's latest share of the market was 72.9%, down from 82.2% a year ago, according to Mercury Research, a research firm in Cave Creek, Ariz.